Rising cost could crush plan for cement plant

Published:
13 June 2005

After years spent fighting environmentalists and getting the necessary permits, Holcim Inc. says the sprawling cement plant planned for a site 40 miles south of St. Louis might never be built because of soaring construction costs.

Planned for 3,900 acres on the banks of the Mississippi River in Ste. Genevieve County, south of the Jefferson County line, the plant was proposed in 2000 at an estimated cost of US$600m. Since then, prices for building materials such as steel and lumber, as well as for energy, have soared. So has the project’s price tag.

Holcim, the US unit of Switzerland-based Holcim AG, is conducting a study to determine if the project will be built and at what cost, said spokeswoman Nancy Tully. A decision is expected later in the year. If it’s built, the plant would be the largest in the US producing 4Mta of cement.

"Due to delays in permitting, costs have gone up," Tully said. "We needed to ascertain if this project is still feasible. It is important to make sure that the need is still there and that it is cost-effective."

Holcim insists its desire to build the Missouri plant hasn’t changed, nor has the scope of the project. Also unchanged is the project’s importance to the regional economy and jobs that ride on Holcim’s decision. The plant is expected to employ about 1200 workers at peak of construction as well as provide about 200 jobs after completion, Tully said.

The project would include some land in Jefferson County, but no actual development. Jefferson County Commissioner Pat Lamping - who formerly served as the county’s director of economic development - said that if the plant were reduced in scope or eliminated, the impact would be felt regionally, and not just in Ste. Genevieve County.

"From a regional perspective the reduction of jobs certainly will have an impact," Lamping said.

That soaring raw material costs could derail the giant cement plant is ironic, especially because cement, a key ingredient in concrete used to build home foundations, roads and runways, is itself in short supply in many parts of the country.

The Associated General Contractors, based in Alexandria, Va, says a construction boom has led to dire shortages in parts of 23 states, including Missouri, which could lead to project delays and layoffs. The group sent a letter to US Commerce Secretary Carlos Gutierrez a week ago requesting the government lift a YS$50/t duty on cement imported from Mexico.

The US imposed the duty 15 years ago after a group of cement producers in Southern states complained that Mexican producers were "dumping" cement in the US below cost.

A Commerce Department spokesperson said the Bush administration has continued informal talks with Mexico as well as representatives from the cement industries in both countries "to see what sorts of alternatives are available to resolve the issue."

So far, the St Louis area has been spared cement shortages because there are a number of production plants in the area, good access to river and rail transportation and because the demand isn’t so great as it is in some other parts of the country, according to local contractors and construction economists.

Last year, the U.S. imported about 23 per cent of the 119.9Mt of Portland and masonry cement used from Canada, Thailand and other countries, according to the US Geological Survey. That number has been growing because demand is growing faster than supply. The pickup in demand is especially being felt in places like eastern Washington and Texas, where shortages are most severe.

If Holcim moves forward, construction of the Ste. Genevieve County plant would likely begin next year, though some site preparation could begin this year. Tully said it would take three years to complete.